December corn was trading 4 cents higher near 7:30 am cst and Dalian corn traded 0.69% higher overnight. China Q3 GDP met market estimates at 7.4% while industrial output improved by 9.2%. Markets reacted positively to the news which added to the supportive momentum from yesterday after housing starts data created optimism over the growth of the US economy. The US Dollar was modestly higher overnight and is seeing support this morning. Commodity markets saw gains throughout the evening.
Strong domestic cash markets and a more positive tilt to outside market forces may help support the corn market over the near-term. December corn traded higher throughout the evening following yesterday's positive finish to the day. Yesterday's volume was recorded at 115,845 contracts and open interest rose by 3,302 contracts. The positive momentum was subdued yesterday despite a sharply lower US Dollar but the industrial output and GDP data out of China overnight came as a relief to many investors which is favoring the commodity bull camp this morning.
The weekly export sales report will be released this morning and traders believe the report will show sales near 200,000 tonnes vs. 14,200 the week prior. The trade is well aware of the sluggish export situation but when looking at the corn balance sheet exports only make up 10% of the total corn demand while feed and residual are 37% and Ethanol is 40%. The demand matrix suggests that while prices have done an adequate job of rationing demand in some areas, the more heavily weighted demand components may still provide substantial support to the market place, specifically the cash market. Evidence of this is seen in the strong interior basis and the inverted forward curve of futures prices.
Basis was firm yesterday across the US Corn Belt. Support came from lack of farmer sales and on firmer basis in Brazil and Argentina. The stronger basis in Argentina may have been linked to shipping delays and on optimism that the EU will be in the market to import corn soon. Basis in Decatur, IL was unchanged at 15 cents over the December contract. River markets were positive yesterday with bid in Morris, IL jumping 2 cents per bushel to 15 cent under. Bids in Blair, NE rose by 5 cents per bushels to 40 cents over the December contract. The 3 year average basis in Omaha, NE (which is just 25 miles south of Blair) is around 17 cents under the December contract. The strong basis across the US, strong calendar spreads, and the fact harvest is all but complete in the west suggests a positive outlook to the corn market. Ethanol production was reported at 797,000 barrels per day vs. 800,000 last week and Ethanol imports rose to 36 million gallons last week which was up 15 million gallons from the week prior.
Indonesia's poultry industry is calling on their government to do away with their corn import tariffs in an effort to increase their domestic stockpiles. The government scrapped a 5% duty on soybeans in late July for the remainder of this year and the move signifies the urgency of emerging economies to build supplies as food prices rise around the globe.
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